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How do you understand our political system operates? Maybe similar to this. We elect MPs. They legislate on bills. When a majority is secured, the bills pass into law. Statutes is maintained by the courts. That's it. Yet, that was how it once functioned. No longer.

The Rise of Offshore Courts

In the modern era, overseas companies, or the wealthy individuals that control them, have the power to sue elected administrations for the policies they pass, at offshore tribunals composed of business advocates. Such disputes are held in secret. Differing from national judiciaries, these tribunals allow no right of appeal or legal review. Ordinary citizens cannot take a case to them, and neither can our government, including companies operating from this country. The door is open solely for businesses registered abroad.

When a secret court finds that a legislative action may compromise the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions, running into billions.

These awards constitute not tangible damages but funds the arbitrators determine the company would perhaps have made. The state may have to drop the legislation. It becomes discouraged from enacting future policies in that area, worried about incurring a lawsuit.

A Process Growing Exponentially

Unprecedented levels of cases are being initiated, as corporations observe each other, and private equity finance suits in exchange for a cut of the settlements. The result? Democratic sovereignty and popular rule are now prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede domestic law and the rulings taken by parliaments is that this provision has been inserted – without democratic mandate, and often in an atmosphere of extreme secrecy – within international trade agreements.

A Real-World Instance: The UK Coal Mine

Last year, environmental campaigners secured a significant win at the High Court. The justice ruled that proposals to open the first major coal mine in the UK for 30 years, in northwest England, had been unlawfully approved by the previous government, which had endorsed the questionable argument that the mine could have zero effect on national carbon targets. The Labour government then withdrew the licence the former government had granted. Currently, this success faces being overturned by an secret arbitration panel answering to exclusively the entities filing the suit.

In August, a corporate entity whose ultimate owners reside in the offshore financial centre lodged a claim challenging the UK government. The previous week a dispute settlement body in the United States was convened to consider the case.

The claimant is suing the UK for the profits it would have generated if the mine had been allowed to proceed. The public has little idea how much this might be. Which individual is acting on its behalf against the state? A member of parliament, and ex-law officer in the Conservative government, the self-proclaimed patriot the MP. The state enacts a policy, the national judiciary supports it, then a foreign company disputes it through an undemocratic private court, and a member of our parliament represents its behalf.

An Oligarch's Challenge

Simultaneously that the court on the coalmine case was appointed, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, an oligarch. We know nothing of the case at present, but it is highly possible that he’ll use the ISDS mechanism to contest the restrictions the UK enacted against him subsequent to the war in Ukraine. He has already filed a claim against a small nation with similar intent, demanding sixteen billion dollars: half that government’s annual revenue. Part of the counsel acting for him in that case? Cherie Blair, married to the ex-UK leader.

Legal experts believe that the EU’s delay in utilising seized oligarchs' funds as guarantee for its financial support package is due to apprehension in Brussels that it could be sued in the ISDS tribunals, under a investment pact. This unprecedented, undemocratic power over elected governments may be obstructing the money Ukraine critically depends on.

Misleading Claims and Mounting Costs

We were assured that these scenarios were not possible. Previously, a senior politician, championing the largest and riskiest of all these agreements, declared: “We’ve signed investment treaty after trade deal and there has never been a case in the past.” A consultant on this issue accused activists of “exaggeration … the fact is, ISDS barely touches the UK much”. The general impression was crafted to be that exclusively weaker states should be concerned by ISDS claims. Cautionary notes that “once firms grasp the power bestowed upon them, they will turn their attention from the vulnerable countries to the wealthy nations” were dismissed with scepticism.

That prediction is now a reality. This year, oil and gas and mining firms have filed a historic level of cases against nations across the economic spectrum, contesting – like the example of the UK mine – state efforts to halt environmental catastrophe. Corporations have thus far won $114bn through ISDS, of which fossil fuel companies have obtained the majority. That represents the combined GDP